Financial Post, Weekly edition,
Wed 14 Jun 95,
page 17

Keywords: International finance
World
Southeast Asia

New economic powers in the world

Tom Grimmer

As the men in suits prepare to sit down at that table in
Halifax tomorrow, it's an ideal time for pondering the makeup of
this organization. From an Asian perspective, the G-7 looks
increasingly like the old world order. And for a beast with
economics supposedly at its core, it also seems to be missing some
rather substantial points.

We've all grown accustomed to these G-7 rituals. Seven leaders of
the industrialized world get together, swap platitudes, talk about
the world as it should be (and maybe once was), pat each other on
the back, issue a meaningless communique, and go home.

Nothing much ever comes of a G-7 summit, but then no one really
expects anything will. At best, it gives some very broad and
intentionally vague signals. (If you'd like to know what most Asians
are watching at this one, it will be first the potential effect on
the US$, and second what transpires between the U.S. and Japan in
their auto-trade dispute. Impotent blather about Bosnia will go on
page 10.)

But far more than what happens at a G-7 get-together, its
importance is symbolic. Lets face it, it is a way of once a year
reminding everyone of who calls the shots. Six white guys and one
Japanese. Get it?

You may think the Japanese presence means that Asia is represented.
Not really. Japan is a different creature among Asian nations, a
country allowed by the West to achieve the status it has because of
its undeniable economic might and also its value as an ally during
the Cold War. In addition, Asia's a varied place, and the Japanese
are one among many strong cultures. Japan is also widely resented,
for reasons we won't explore here. To think the Japanese represent
''Asians'' is like thinking the Americans stand for everything in
the ''West.''

In the past decade, and particularly in past five years, we've seen
economics and trade come to the fore in our world. Hence the
obsession we have with the likes of NAFTA, APEC, the EU and the WTO.
(My advice to any young person looking for a career path: get into
acronyms.) If you look at the numbers (which is what all this is
about), you start to think that maybe the G-7 is a little narrow by
today's yardsticks.

That's a point not lost in these parts. Here's an example: recent
statistics from the International Monetary Fund show that 10 nations
in East Asia excluding Japan now account for almost one third of the
world's foreign exchange reserves. Not counting gold, East Asia
holds US$375 billion. The entire G-7 has US$377 billion. All the
other nations on the globe combined account for US$436 billion.

Among East Asian nations there are some real stand outs: Taiwan
this week announced it holds US$100 bilion. China and Hong Kong
combined are more than Taiwan's total. Singapore - with a population
of three million - has roughly US$52 billion.

Bean counting, I know, but then G-7 membership is an exercise in
accounting: who has the biggest GDP. This of course is calculated in
absolute U.S. dollars. But if you take China, for example, and
calculate GDP on the basis of purchasing power parity (PPP), it has
the third-largest economy in the world. (Best not to worry about PPP
then.)

If we turned to talk about savings rates, government indebtedness,
trade strength, competitiveness, or a number of other factors, the
comparisons would be truly embarrassing.

Something's wrong here. A group of people who supposedly represent
the world economic order are sitting down once a year without
representation from the most dynamic region in the world. The G-7
makes itself feel better by inviting along Russia for a look - a boy
peering in the candy shop window. Or talking about Mexico's troubles
- we really must do more for these people who can't control their
capital accounts and currencies.

It looks like an old boys' club, slightly out touch with reality
and maybe a bit patronizing. It's high time that was changed to
reflect the new economic powers in the world. This would mean new
responsibilities for Asian nations, perhaps ones that they are
reluctant to, but must, assume. Perhaps more significantly, it would
also involve an admission by the G-7 that our globe has changed - as
tough a fact as that may be to accept.

(Ed. note) Tom Grimmer is assistant director for research
with a leading Asian brokerage house in Hong Kong.